Working Paper: CEPR ID: DP9434
Authors: Christian Fons-Rosen; Sebnem Kalemli-Ozcan; Bent E. Sørensen; Carolina Villegas-Sanchez; Vadym Volosovych
Abstract: We revisit the relationship between foreign investment and productivity of acquired firms. First, we construct a panel firm-level dataset for eight advanced European countries covering domestic and foreign acquisitions together with detailed balance sheet information for the years 1999-2012. Second, we address the challenge of identifying a causal relation. To that end, we compare foreign to domestic acquisitions in addition to accounting for the impact of majority versus minority acquisitions after controlling for country and sector trends. The productivity of foreign acquired affiliates increases modestly after four years, but only when majority stakes are acquired by foreigners. Our results are driven by foreign acquisitions and not by foreign divestment.
Keywords: multinationals; selection; majority ownership; advanced countries
JEL Codes: E32; F15; F36; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| foreign investment (F21) | productivity growth (O49) |
| majority ownership stakes (G32) | productivity growth (O49) |
| foreign acquisitions (F23) | productivity growth (O49) |
| foreign divestment (F23) | productivity growth (O49) |
| productivity changes post-acquisition (O49) | productivity growth (O49) |